Regional Borders and Trade in Asia

Woong Lee and Chankwon Bae

Trade Working Papers from East Asian Bureau of Economic Research

Abstract: This paper investigates the effect of regional borders on trade in Asia. The regional borders define the three regions of Asia : South, Southeast, and East Asia. Regional trade indicates the flows of trade within a region, whereas regional border trade means trade across regions. A gravity model is augmented with the region dummies to estimate the regional border effects that capture any and all time-invariant factors promoting or impeding regional trade. The main finding is that regional border effects are asymmetric on the three regions in Asia. There is a large and significant regional border effect on South Asia, small on Southeast Asia, and negligibly negative on East Asia. The significant and positive regional border effect in South Asia suggests that countries share intrinsic factors facilitating trade between the countries in this region. Although the regional border effect of Southeast Asia is positive, its magnitude shows little difference between its regional trade and regional border trade. Finally, the estimate on East Asia presents a completely different picture from the actual data. It implies that there exist some factors leading to active regional border trade between East Asia and other Asian regions.

Keywords: Border Effect; Regional Borders; Natural Trading Partners; the gravity model (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-cwa, nep-geo, nep-sea and nep-ure
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Working Paper: Regional Borders and Trade in Asia (2013)
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